Potential buyers queue for Alstom

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The sale of French company Alstom's local transport businesses is edging closer, with potential bidders expecting to be issued information memorandums in coming weeks.

Industrial services companies such as Transfield, Downer EDI and United Group are tipped as the most likely buyers and sources close to Alstom said the sale was expected to fetch $300-$400 million.

Alstom is selling its Australian and New Zealand transport businesses following financial problems in other operations and pressure from European regulators. The sale, which excludes its energy operations, was first flagged in May and approved by shareholders in July.

While not a household name, Alstom is a significant player in the local rail industry, providing products and maintenance services to a number of networks.

A big part of its business is the manufacture and maintenance of trams and trains in Melbourne, where it has a joint venture with rail operator Connex. The division employs about 2000 people across Australia and NZ.

Credit Suisse First Boston analysts estimate Alstom's trans-Tasman transport business generates earnings before interest and tax of up to $20 million, indicating a $200 million purchase price. But a source said the business earned more and would fetch more than $300 million.

Transfield managing director Peter Watson said in August that Alstom's local rail business was one of five potential acquisitions.

But Transfield would be less interested in Alstom's manufacturing operations.

CSFB says cost synergies for Downer or United Group would be higher, but they would face conflicting relationships. Downer is partnered with Alstom on the Millennium train project in NSW. United Group and Alstom are working on a contract tender for passenger cars in Perth, competing with Downer.